Troubled past blamed for Co-op Bank’s £600m losses

THE “legacy issues” faced by Co-operative Bank resulted in pre-tax losses of more than £600m last year but it insists that its turnaround plan is having an impact.

The bank was plunged into crisis in 2013 when its proposed takeover of 600 Lloyds Bank branches collapsed, its chairman Paul Flowers was publicly disgraced buying drugs and the year ended with losses of £2.5bn, and it clinging on for survival.

The troubled Manchester-based lender remains in a difficult spot – conduct and legal risk charges, including PPU claims, nearly doubled to £193.7m in 2015 – although it is focused on making the bank more resilient.

Chief executive Niall Booker, whose contract ends this year and isn’t expected to stay on for the long-term, believes the bank has made “considerable progress”.

He said: “In 2015 we have been successful in improving capital resilience, reducing costs and strengthening the performance of the Core Bank and the expected widening of our financial loss compared with 2014, due to legacy issues we have known about and highlighted for some time, should not distract from the considerable progress made in turning the Bank around.

“The work done in de-risking and simplifying the Bank means the business is much stronger than a year ago and, in particular, the continued strengthening of the performance of our retail franchise is encouraging for the future.”

However he expects the Co-operative Bank to report pre-tax losses this year and next, although forecast a return to operating profitability for the core bank before the end of 2017.

The core bank saw the number of mortgage completions more than double in 2015 which created a stable loan book during the second half of 2015. It said the number of prime current accounts increased in 2015 and the total number of current accounts remained broadly stable.

Booker added: “There is still considerable work required to fully implement the Updated Plan but we remain positive that we are gradually developing a more resilient bank, distinguished in the market by our values and ethics that can create value for all our stakeholders over time.”